The Options Strategy That Lets Traders Sleep Peacefully !! #Face2Face with Vaibhav Shinde

INVESTMENT IN SECURITIES MARKET ARE SUBJECT TO MARKET RISKS. READ ALL THE RELATED DOCUMENTS CAREFULLY BEFORE INVESTING. Some trader is coming and telling that today is Thursday, it's expiry. I bought options worth 1 lakh and they have become 7 lakhs, 10 lakhs. If he is able to do this, then I will also be able to do it. Why not? Then one day, I got a bad move. But that day I lost around 30% of my capital. Then I realized that option selling is the real game. So, you tell me this secret today, right? We are going into a jealousy zone now. Okay, what are the rules of the strategy? Gap was good for you. But you were short. I do bank nifty buying as well. So, typically I am an option seller, but 10-15% of my portfolio is also into buying. What's your CAGR? Approximately, if I ask you. And when I back-tested that, fantastic result. I mean, I felt that I have got the holy grail. So, have you done this live? Yes, I have. Welcome to another video of face-to-face trading. I am your host, Vivek Bajaj. Friends, there is a philosophy of my life and it is a very beautiful philosophy. It is very important to sleep. It is very important to sleep. Now, if you ask anyone, whether you go to a mental doctor or a physical doctor, he will say, the top thing in your life which you should do is sleep. And this stock market is such a thing that it can spoil your sleep. But I have not let this happen in my life. I have always told the share market one thing that, if it disturbs you in sleep, I will reduce the position. Sleep is very dear to me. So, the guests who have come with us today, they also love sleep. Because they have brought a strategy, which is a sleeping strategy of peace. You will enjoy meeting them. They are young, quite dashing, smart and also intelligent. They are now full-time family men. I have never heard of a full-time family occupation. Today, I am going to discuss this with him. How to become a full-time family man and how the share market has given you the capability that you can become a full-time family man. But before I call him, just a small disclaimer. Neither did I take money from him, nor did he give me money. It is a pure educational initiative. So, please take care of yourself. You do anything with him, it is between you and him. I have nothing to do with it. Secondly, I was watching the analytics of my YouTube channel. So, 50% of the people are watching the videos without subscribing. This is cheating. This is absolutely cheating. Because those who don't need money and with which YouTube can find out that I am doing a good job, you are not supporting me in that work. You are consuming my empty content. This is very, very bad. So, please subscribe. One minute. Two. Three. Yes, I have subscribed. Let's go. Now, let's call our guest for today's face-to-face trading, Mr. Vaibhav Shinde. Let's go. Thank you, Vivek ji. Thank you for having me on this face-to-face interview. This platform has been an inspiration for a lot of traders and also for me. During my initial journey and initial phase, and even now I refer to the podcast and a lot of great traders come on this platform. Right. And every person has taught me something which has also helped me become a better trader. So, thank you for inviting me. And I hope that even I am able to pass and give my bit to the community that you have created. So yeah. Thank you so much. Thank you. I love that you called it a community. I want to tell you that what we are doing with this face-to-face. I think the most important thing in this face-to-face is a discovery platform. People like you who are doing something good and who are next door. And everyone thinks that if he can do it, why can't I do it? This was our goal. When we started, the first face-to-face was with Chetan Panchamiya. He is my friend here in Calcutta. I told him that Chetan Bhai, thousands of people like you can become Chetan. But no one tells your story. Everyone tells stories of big people in CNBC. So, I think we have become very good in that. Obviously, there is a risk that someone can go wrong. So, we are ready to take that risk. But I am very happy that Weber, we were able to identify you. Thank you so much. That you are doing such a great work in market as a trader. So, a little journey about you. Okay. How did it start? What are you doing now? All these things. Sure sure sure. Let me give you a little family background. Dad is a government employee. Mom is a homemaker. We are two brothers. And if I talk about trading or even talk about the stock market. So, there is no relation far and wide. In fact, for my parents, the stock market is like gambling. Until three years back, dad didn't even invest. Whatever it is in saving account. It's only when I told him that do something. Start mutual funds at least. That is when he started doing. And yeah, the market rewarded. He invested in COVID, so the money increased in mutual funds. But yeah, I mean, no relation to the market. I was born and brought up in Kalyan, a small place near Mumbai. Okay, from Maharashtra. Yes. Generally, I am asking that in Maharashtra, do Marathis have a stock market culture? No, in fact, so just our neighbors is Gujarat, right? The Gujarati community is as active as it is in the stock market. And I got to learn a lot from that, my friends in that community as well. Unfortunately, we don't, Maharashtrian community doesn't do that much. I think it's more about stability. Take this job and let's have a secure income come in every time. So that is, but I think a lot of young traders in this community also are exploring this path. So you are going to become an idol. The community ultimately needs ideas. We have to set an example. Gujarati has this, Marwari has this. Because there were ideas that we believe in a lot. So hopefully, I mean, there are a couple of Bengali traders I have recently interviewed. And I'm just amazed that Bengali and Marathi are so similar kind. Risk averse, do your job, live your life in peace. But there are some good Bengali traders I've been able to identify. So you are going to become an idol. Let's hope. Yeah, so I did my schooling from there. Then I did engineering in college. Yeah, I did my engineering from Thodumal Shani. You mentioned Khar Road, right? So that's the college near Bandra, right? So I did my engineering from there. Then I worked in IT for three years. Then I said, I want growth, I want growth. So I did my MBA. Passed out from Zimnal Bajaj. And actually, I did my MBA from marketing. So till then, there's no touch of financial world that I've seen. And yeah, then I worked in corporate for around 14 years post MBA. Worked in great companies like Johnson & Johnson, Zydus Wellness. Had a great time managing brands. So I was into brand marketing. I used to head different brands. So yeah, I think. And then parallelly, I started trading. I did trading for 4-5 years. And now everything is on track. I had some health challenges. So I moved out of the corporate world. And then I was like, from here, I'm able to earn decent. Plus, I wanted to give more time to my family and health and personal life. So yeah, I took that call a few months back. Yeah, it's going great. If you don't mind, can I talk to you about your health challenges? Yeah, I think. So I'll tell you, when you asked me about the journey from becoming a corporate professional to a trader. And actually, I don't call myself a trader. I call myself a full time family man, because that is what I would like to be known as. This journey, there are, I think, three key triggers that helped me transition into this field. If you had asked me six years back that, where do I see myself? If I would have said, it's a corporate journey. If I want to become a CEO, I want to become a CEO. That was kind of a thing. But I remember 2017-18, a corporate journey was doing great. And I used to read a lot of books for my development and how to make wealth. I used to read all that. So I stumbled upon this book by Robert Kiyosaki, is Rich Dad, Poor Dad and The Cashflow Quadrant. And those two books have been instrumental in my thinking or shaping my thinking. Right. Especially around wealth. What I understood is that the people who are wealthy, for them, they don't depend on a single source of income. They will have multiple streams of income whenever they are looking at things right. And what I realized is, if I want to become wealthy, I need to have additional sources of income as well. At that time, there was only one source, which was job. And the other thing I realized is that a single source of income is also very fragile. Because the world is changing, right. And now, especially with AI, it's at a different level altogether. There's no job security at all. But you never know, right. So it's important that, especially if the family depends on you, you should have other sources of income as well. So that is where I started to evaluate, can we do something else along with the job? So that we can get some additional money. I tried the search for a year or two, but I couldn't find anything. But then in... 2020 COVID happened, right? So, in 2020, we had a lot of time. And when we are online, we see this lot of ads by a lot of these tutors on trading. Correct. And I used to get influenced. What is to happen on YouTube? Some trader is coming and telling that, look, today is Thursday, it's expiry. I have taken options of 1 lakh and they have become 7 lakhs, 10 lakhs. I was like, I mean, I am also intelligent. So, if he is able to do it, then I will also be able to do it. Why not? And when I used to watch such videos, I used to get like, yes, I will also do it. So, I have joined some courses. I joined some courses and I learned a lot. I mean, I was learning because what happened was that I was taught since childhood that the more you study, the better it is. Okay. So, if you are studying maths, then learn integration, learn differentiation, learn calculus, learn algebra, learn everything. Your maths and mathematics will be better. But unfortunately, in trading, I think, as you say, sometimes it is better to keep things simple rather than doing a lot of complicated things. And what I did was, I used to learn about support, resistance, 10 indicators, 10 setups of 10 indicators, Elliot wave, then someone is saying that smart money concept is going on in the market these days, do that, liquidity is going on, do that. So, in a year or a year and a half, I had done 3-4 courses. I had done courses of about 2-3 lakhs. And I was not earning a single rupee from the market, frankly. I was trying everything. Especially as when you are in a job, you can't focus on the markets, right? So, then take a forced trade, then there is an issue in it, then there is a loss. Okay, no, after the job, we do it in the evening, we do a commodity. So, we are doing silver, gold, there is a loss in it. So, the one who wants to do time at home, I am also having a bad time. So, I realized that there is something going wrong. And what I realized, now I realize this is, trading versus a normal upbringing, these are diversely, I mean, very different, right? Because when we used to study in school in childhood, and when 98 out of 100 came, 2 went, then we were not happy that 98 came, we were sad that where did 2 go? And it happens that dad will ask, how did 2 go? This is such a strong subject. So, always being right or the urge to be always being right was always there and that is happening in corporate as well, right? If you have a target to beat 100%, you achieve 98%, why did you miss 2%? Your variable goes down, right? So, but trading, what I realized is you can have a hit rate of 40%. I mean, you look at my P&L, 60% are red days in my P&L. 40% are profitable days, but that cover for the entire year's profit. That was one change. The other is, keep it simple, don't read too much, focus on what is there. So, I think all these things I have learned now, but I was not, that time I was not making profit. And I used to do option buying, typical, whatever averaging I used to do, I used to do big losses. Then I, what happened in 2023, I had a health challenge. There was this disease called as Gullien-Barr syndrome. Okay. What happens is that it's an autoimmune disease. Okay. It attacks your nervous system, the peripheral nervous system. And for 10 days, I was completely paralyzed. Like in the hospital, I could, I could see, I could talk a bit, I could somehow eat, but I couldn't move my hands, like nothing. And it's a random, very rare disease. It just happens. So basically what they say is it's a, it's a side effect of COVID. If during COVID, and I have had COVID twice, if during COVID, if you have taken steroids from medication, then the probability of this thing happening has increased. So if you see in the last three years, GBS as a, as a disease, the probability has increased a lot. Okay. After vaccination. Yeah. This is a side effect. Yeah yeah yeah. But nowadays, a lot of doctors have made it an excuse that this is happening to you. COVID vaccination. Maybe. So I'm not an expert in this field. We don't know exactly. That is what my... But sometimes it's genetic, that, you know, maybe some, I don't know, but it's scary to get it all of a sudden. It was very scary because, because I, I, I was just what, I was around 36. And I had like a one and a half year, a one year daughter at home. And we were like, what happened? And then it took me three months to get back. And I should say that my company really supported me. I used to work in, I had this wellness before I went full-time. Right. And they really helped me out, took care of me. But what I realized is, life also is very fragile. You never know what can happen. And it might also happen that you don't have the physical capability to deliver for your job and earn money. And what I realized was, if we want to earn money, then we should not be physically active. You are not able to give time physically, you are not able to give active time. But can we generate some income? That was my clear learning from that. And that is when I started evaluating that I am not getting time in the office. So, to do trading, can I automate some of my setups? Okay. So that, whether I am sitting in the office or anywhere, my trade is coming, entry is coming, exit is happening. Everything is running on auto mode, I don't have to do it. So, and thankfully, over the past 5-6 years, automation has picked up in trading. So, I saw a lot of platforms, many of them are no-code platforms, right? Or pseudo-coding platforms. So, I understood about those platforms, learned about them, saw YouTube videos around them. And I took a simple strategy of supertrend. If there is a green supertrend, if an inverted hammer comes there, then I will buy the put. Okay. Simple. And this reward is 1 out of 2. Run it. Nice. I mean, literally, this was the rule in it. That do this and if the supertrend, sorry, if the supertrend is green, then this should be a normal hammer. If it is red, then it should be an inverted hammer. So, this strategy, 1 out of 2, was running decent. I mean, some months there is a profit, some months there is a loss. But what I saw is, my P&L is becoming a bit green. Which used to be red always, is becoming green. So, I was like, this is working. And the other thing was that while I was in office working, this is happening automatically. I don't have to intervene manually. So, yeah, I mean, that really changed my outlook. Then what I did was, I also understand about options. And what happens is, when you do any course, typically, they teach option buying only. And everyone is so excited about option buying that they want to double the money. I realized that when I looked at a lot of traders who are successful, and when I read about them, even international ones, for them, even if you get an ROI of anywhere between 20% to 40% CAGR level pay, it's too much. I mean, if big people are doing so much, then why do we have to double the money every month? Which is not happening, not happening to anyone. And I was like, there has to be some realistic expectation from the market. Correct. So, I got an expectation. And I was like, even if I'm able to beat mutual funds ROI and say, even if I generate 20% from market, at least at the start, I think that would be a win for me. And then I realized that option selling is the real game because the probability of an option seller winning is 2x that of an option buyer. Because theta works in your favor. That is when I moved to option selling. So, that really transitioned my journey. But yeah, then the third trigger came in, wherein I used to do option selling. And I used to do straddles, triangles, typical. While you were in job? While I was in job, yeah, everything. I mean, in fact, what I realized was that, given I was doing good in trading, it's not that your confidence is increasing in one field, then why does your confidence increase in all the other fields? So, in fact, I was actually growing in my job, getting promoted as well. So, I think that that was a really good time. And systematic automated trading really helped me achieve that. And what used to happen, I used to do typical straddles, triangles. And you remember that time, there were daily expiries. So, what happened was, I used to do Nifty on Monday, then Bank Nifty, then Nifty, then Sensex. So, we are selling straddles, triangles, and we are getting money. What used to happen sometimes, I typically keep stop losses on both the legs. So, if the market hits a V, then my call also flies and the put also goes. Now, at 10.30, I have free capital. Stop loss is gone, capital is free. I don't know why, but I still used to say that there is money in the account, let's do manual trading with it. Okay. So, there is an expiry, OTM 5, OTM 10, we are getting good premiums. Let's sell it, some money will be made by the end of the day. It went well for a few weeks. Then one day, a move came, dirty. I mean, the market was falling. And I was selling puts. And I just kept on averaging with no risk management. Okay, algorithm is working very good. But this trading, I was doing and I took a big loss while averaging here. Thankfully, I was trading with only around 7-8 lakhs of capital. So, but that day I lost around 30% of my capital. Okay. So, basically, I lost 1.5-2 lakhs. At this point, I would like to say that what really helped me during that exact loss was, I remember that day, I called my wife. Okay. And my loss was like, when the market was going, it had reached around 2.5-3 lakhs. And I was like, this issue has happened. I have a loss and I am not able to cut my position. Okay. And she was like, Bro, it's okay. This is a phase and you're doing a business. Losses will be there. Let's learn from this loss. You take a call when you want to cut your position. Okay. But don't worry. It's a loss that we can bear. It can't, it can't, it's not something that will hamper our life in general. So, I am really thankful because when you have support from your family members, as a trader, that really helps. And yeah, I took the loss at the end of the day, but that time I made a promise to myself that I am doing algorithmic trading, automated trading, that's working beautifully. Why do I need to intervene and do manual trading, which I've never succeeded in? Because I can't control my emotions. Let's outsource that as well. And from that day onwards, I have never ever traded a single manual trade. I haven't taken a single manual trade. In fact, if you ask me what's going on with Nifty right now, I don't know if it's 24,000 or 25,000 or 26,000. But your trade is going on. Yes, my trade is going on in Sensex today. But I don't know what level Sensex is at. And I don't know if there's a gap up or a gap down today. I have no idea. But is this expiry algorithmic trading? On the basis of expiry? Yes, the weekly expiry of Sensex is tomorrow. So, is your position open? Yes, it's completely open now. I mean, if my capital is 100%, then 70% of my capital is deployed right now in Nifty and Sensex. And you are talking to me in the market hour and you didn't even look at the screen once. Yeah yeah. I mean, why should I look? There is no actionable from looking at the screen, right? But risk management? If there is a slippage, you should know. So, the orders are there in the system. Even if there is a slippage that happens, then the algo reconfigures itself to then place a market order and exit. And if there is an error, I would get a notification on my phone. So, all I need to do is, keep an eye on the phone to see if there is a sound or not. If there is a sound, then I will have to see. But in my experience over the past so many years, it happens once in a quarter or once in 6 months. That sound comes. Yes, and if there is a lot of volatility on that day, then it comes. So, in fact, you were telling in the starting that sleep is very important for a trader, right? Yes. Absolutely. For me, normal sleep is important. For me, my afternoon sleep is also important. So, I sleep from 2.30 to 3.15 every day. It's like a power nap for me. Have lunch with my daughter and then I sleep. So, yeah, I think that was a trigger, the last trigger for me that why look at manual trading? Let's do algo trading itself. And apparently, the job was doing great. Unfortunately, because of that thing that happened to me, it has a little more side effects. So, then there is a sleep disease that happened to me. So, plus plus sitting hours are long. In corporate, if you are traveling in Mumbai, you know what the condition of the road is. So, then I was like, and again my office really helped me. They gave me a sabbatical as well for 3 months. Normally, a sabbatical in corporate for 3 months at a leadership level is very difficult. But our leadership team was very good. Allowed me, I came back. But I was trying to give my 100% but could not. Then I said, I am not able to do justice to the job. I love it. I love the people over there. Then I said, okay, let's take a break. Plus, what I had heard from a lot of people is that when your kids are younger, that is the best time to spend time with them. Unfortunately, a lot of people in the corporate miss that period. And my daughter is 4 years old. And once she becomes 12-13, she will have her own friend circles. Baba will hardly be irrelevant. But these 7-8 years are like very crucial years, right? So, I love spending time with her. And then I was like, let's focus on her. And focus on family, focus on health. So, do some workout every day. Do some therapy. Spend some time with the kids. Go for a walk with your wife. Apparently, this is going on. That is what I am doing right now. Almost, I should not say retired. But yeah, you have created that space for yourself, which is leading to a better retirement in future. Yeah, and I think the concept around having freedom. Freedom of time to do whatever you want to do. So, I want to meet my friend. My friend is free. I remember the other day, it was a Wednesday. And I thought, I want to watch a movie. Let's watch a morning show. On a weekday? Yes, on a weekday. So, my wife said, let's take a leave. You are at home. So, we went and watched Durandar in the morning. So, I have never ever thought in my life that on a Wednesday morning, I can just go and chillax and watch a movie. And the trade is going on, which is fine. But yeah, I mean that's... This is crazy. Yeah. So, tell us this secret today. We are going into a jealousy zone. So, I don't want to make you feel bad about it. So, share the secret. I think you already have made a beautiful presentation for us. So, let us take that presentation as a base and start our discussion. Absolutely. By the way, you are a very good human. I mean, I have seen two times you have thanked your company. Yeah. Which is very important. I mean, people should say thank you publicly. And obviously, you thanked your wife too. So, it's good. I like the gesture. Let's start the presentation. Yeah. And I think the people around me have been really instrumental. Yeah. My company, my family, even a lot of traders in different communities and mentors. You get to learn from a lot. Like yourself. There are a lot of people who have taught me a lot. So, I am very grateful to all of them for making me a good trader. Superb. Yeah. All right. Sure. So, what I have got today for the audience is a strategy that I use in one of the portfolios. Okay. And it's called the sleep strategy. As you said, sleep is very important for a trader. Especially, given the geopolitics that is happening right now. Right. Tomorrow, some deal happens. The market gaps up. Who would have thought that Nifty can gap up 1200 points. Not even on a weekend, but on a weekday. Right. And if you had call shots, only God will help you. Right. And similarly, a lot of things keep on happening overnight. And a lot of people don't want to take a risk on certain sections of their portfolio. So, what I have got over here is an intraday strategy. So, it will take us entry in the morning and exit by 3.15. So, no overnight positions. And it's a low risk option selling strategy designed to generate some alpha. So, that's one. Now, if I talk about strategy objective. What is the objective? So, we always have to keep one thing in mind that whatever trading we are doing or whatever strategy we are doing, what is its objective? What do you want? You want a higher ROI. Then you should be ready to take a higher risk as well. Higher drawdowns as well. Do you want a moderate strategy or do you want a low risk, low return strategy? Over here, what I have defined in terms of risk management, it's a low risk, low drawdown framework. And while I am calling it a strategy, please don't interpret it as a strategy. These are the exact rules. What I am trying to do is, I am giving a framework. You have to think like this when you are making a strategy. You can change the numbers that I have put. You can practice and play with it. But pay attention to the framework as to how you have to do it. So, low risk, low drawdown framework to protect capital while generating alpha returns. The other thing that we will also do is that we will try to use our capital efficiently. Because there is low risk and low drawdown in this strategy. Many times it happens that we have mutual funds, debt funds. And market allows you to pledge that. And get some margin for trading. So, that is what we are going to do over here by pledging our mutual funds and debt funds. So, right now I have kept a very small capital allocation. Only 6 lakhs which is 2 lots to trade for a straddle or a strangle. 3 lakhs each. What I do is, I keep around 3.2 lakhs in debt fund. We get 94% margin after 6% head cut. So, I get around 3 lakhs margin available. So, and then for equity, I keep around 4.5 lakhs. Now, the point over here is that for trading, 50% margin should come from your cash component. 50% should come from your non-cash component. So, non-cash component is equity mutual funds. Typically, you get 80% margin on equity mutual funds. 20% head cut happens typically. What I have kept is 4.5 lakhs to pledge. So, that you get around 3.6 lakhs of margin. You only need 3 lakhs. I keep 3.6 lakhs because the market is up today. It might happen that the market may go down. Your mutual funds may lose value. Tomorrow it should not happen that the value of mutual funds will be so loose that you don't have margin to trade. So, to do that money management, I have kept a little buffer. So that even if the mutual funds fall below 20%, you will still get a margin of 3 lakhs. And if it falls above that, then you will have to put cash. But yeah. Okay principles. Sorry to interrupt in the middle. But you will need cash also for mark-to-market. Yes, which I have covered in the future. In the next slides. Absolutely. So again. make any strategy, you should have some core principles or some core ideas about the strategy. What is the idea that that my strategy is going to leverage? Now, where does this idea come from? Typically observe the markets, you read about the market, you understand the concepts, right? Now, one thing that anyone trading in the markets for some time would know that the market typically tends to remain sideways 60-70% of the times. The market is going to be sideways and non-directional 70% of the times. Can I take advantage of this truth that I know from the market? The other thing I know is that when theta decay happens in option selling, it is a universal truth. Today we have sold options, if in the next 5 days NSE, BSE, everything is closed, then also there has to be a decay in the option. That has to happen. That is the ultimate truth. Theta decay is going to happen. If the market doesn't work also. So, I can short straddles or strangles and I can capture premium erosion provided the market remains sideways. So, now how do I use this? Anyone who has understood about option Greeks and if you understand how theta decay happens. So, typically in an option pricing, there is intrinsic value, there is time value, right? Now, the time value decays over a period of time and at expiry it is 0. But this decay is not linear. It happens slowly in the start but as you approach expiry, it expedites, right? So, the decay that you will get on DT0 which is on the day of expiry would be the maximum. It will be a little less on DT1. So, what I am doing is I am trying to maximize on my theta decay because my strategy is a non-directional strategy. So, what I am doing is DT1 and DT0 which is Monday and Tuesday, I will trade in Nifty. Now, the good thing is Sensex expiry is also there which happens on Thursday and the gap between Nifty and Sensex expiry is 2 days. So, I can play DT1, DT0 also on Sensex, right? I am not doing monthly options over here because I will get 0 option only once in a month. Here, it will be 4 times in a month. Actually, it will be 8 times because Sensex is also there on Nifty. So, my probability of winning increases. So, that is how I am optimally timing the markets and then what is risk mitigation? It's an intraday position, no overnight exposure. What I also do is I am doing two lots. So, I am diversifying. In one order, both the lots are not entering. I am doing a little time space so that there is a little diversification. Since I am doing a fixed premium, I know that if I put a stop loss, like if I think that if there is a call of Rs.100 and I put a put short of Rs.100 and I put a stop loss of say 30% on both the legs. So, I know that if I get an entry of Rs.100 then I will exit at Rs.130. So, if I get a loss of Rs.30 in a call and suppose the market goes down, I also take a put. So, Rs.30 goes there. So, my loss of Rs.60 is the maximum typical that I will get. I am not going to lose on that. And I want, as a trader, my first aim is to preserve my capital. And I don't want very big drawdown days. I don't want single day losses. So, I did that. If you do ATM, what happens is that when your volatility will be high, then that ATM may be selling at Rs.200-200. You must have put a stop loss of 30% and your Rs.60-60 got deducted. Since the volatility is very high, suppose it is selling at Rs.300-300, then your Rs.100 is getting deducted. And when the volatility is very low, then maybe it is selling at Rs.70-70. So, your stop loss is very low. So, this variation is coming in my max drawdowns, max loss days, which I don't want. I want that I know that my maximum exposure is how much to go negative on that day. So, that's why I am doing a fixed premium short. Okay, now what are the rules of the strategy or what is the framework? What I am doing is that I am shorting a C and P of Rs.75. Whatever is close to Rs.75 in the morning, I am shorting it. When am I doing it? I took a simple time. I left the 5-minute candle in the morning because it is very volatile. Take any time between 9.20-9.25. It's not like 9.22 where I have taken an example, that is a very important time. It's nothing like that. If you get that a lot of work is being done on 9.23 and not on 9.22, then you have fitted a curve. Please keep that aside. Take any random time and backtest it. Now what I have done is that I have taken a 50% stop loss. I have taken a little wide stop loss so that I want to get a little room to move. And what I do is that I don't want again a big loss on a day. So, as soon as my stop loss is hit on one leg, I will move the stop loss of the other leg to cost. For example, if I have sold a call of Rs.100 and a put of Rs.100, if the market goes up and my stop loss is of Rs.150, then the call leg is gone. I moved my put stop loss which was at Rs.150 to Rs.100 so that I don't give that much to the market. Because I want to take less risk. That's what I am doing and I will exit all the positions, whatever they are open at Rs.315. So, intraday pure. What I also do is the same logic. I will do one more lot. Any time between 9.25-9.30. Now I have taken 9.29 here. So, we get a little variation. And the rest of the rules remain exactly the same. This I will do on Monday and Tuesday for Nifty. For Sensex, same rules. Given that Sensex is 3x that of Nifty in terms of value, I am doing 2.25 instead of 75. And I am applying the same logic and I am not changing anything else in this. So, we are playing DT1 and DT0. We are doing fixed premiums. And if there is a cost-based stop loss, then the capital will be protected. More capital will go. I mean, as much as there is, that much will go. Okay. Now, we have done a backtest of this. Now, data available is from 14th August to almost till yesterday. Till 6th of Feb. Sorry. Now, the margin for the strategy is around 6 lakhs which is over here. 6 lakhs. Now, let's see the result analysis of this. Now, strategy wins typically on 60% of the days. 40% loss. So, it's a decent win ratio. Average monthly profit in this past 2.5 years is around 15,700 rupees. One thing I will mention that the slippage that I have considered for both Kohola and Put is around 0.8%. Okay. From whatever my experience has been in the markets, I typically get 0.5% slippage on an average level. Okay. But I keep more slippage while doing backtest because I am a conservative trader. I am happy to see a bad backtest and get a good output versus the other way around. Yeah. So, that's the profit. This is the most important parameter for me which is drawdown. It's around 23,000 which means you have seen a drawdown of around 4% on 6 lakhs. Approximately. Okay. Maximum drawdown days are only 41 days and it has recovered in 20 days. What does it mean? 41 days. So, basically, 41 days is how long your strategy was in drawdown. Think that you took a high equity curve in your strategy. After that, how many days is it taking to get that equity curve back? So, suppose you saw a profit of 1 lakh rupees in the whole strategy after so many days. Then it started giving losses, profit, losses, profit, whatever. And then again it hit 1 lakh, 1 rupees say after 41 days. That is the maximum drawdown days. Because a lot of people say that give me some money every month. People say this. I am not required as such but yeah. So, what is the difference between 41 and 21 days? 21 days is when it hit the maximum drawdown. Like what happened this time is that your losses started on 5th March. Then loss, profit, loss, profit is happening but your curve is going down. Okay. After that what happened is that when it hit the maximum drawdown which is a loss of 23,400 rupees. After that it took 21 days to recover. So, many times it is also important that how quickly your strategy recovers. Because typically most of the people like to see profit normally, right? So, that is one parameter. And then there is a max loss which is of 6 lakh is around 1.5% or 1.7% types. So, this is there. What you also see over here is the losing streaks. And this is one thing that I would like to tell the audience is your strategy may have a 60% win ratio. So, you might think that in every 5 trades that I take 3 should be profitable and 2 should be loss making. But statistically that number 5 is very small. It is irrelevant. People say that you should give time for the edge to play out. Which means over a 100 trades you should see how the edges perform, right? So, it has also happened that 4 consecutive losses have happened in this 2.5 years. And that has happened 3 times. It has also happened that you have seen losses for 5 consecutive days. Means Monday, Tuesday, Wednesday, Thursday and Monday you are seeing losses only. It has happened once. So, it is not that if you give 60% then it will continue. So, that is one thing one should be prepared for. Because it is all statistics at the end of the day. So, I think as a trader when you understand that trading is all about data and probability that is when the real trader comes out. Otherwise, it is all gut based and emotion. Statistically, it is very important to look at numbers. Also, one disclaimer. These are back tested results. Actual results may vary. Not necessary that if he has given this in back testing then he is 100% right. 100% that strategy will work in this market. You need to have a probabilistic approach towards markets. But you have considered the slippage as 0.8%. So you have increased the probability of its success. Yes, I have increased it. But you never know that I would show strategies. For example, I do Bank Nifty buying as well. So typically I am an option seller. But 10-15% of my portfolio is also into buying. There are some strategies I have been doing for Bank Nifty. And when I back-tested that, it was a fantastic result. I felt that I have got the holy grail. And there was a bit of curve fitting as well. But for the past 7 months, Bank Nifty buying has been in drawdown. And the historical drawdown that we have seen has reached 1.5 times. So it is not necessary that what you have seen will definitely happen. And hence you need to diversify your strategies. Interesting. So have you done this live? No, there is one more strategy that I am doing live. So that I can show you the positions that are there. Also, look at one point here. Average day profit is around Rs. 1100. But this does not mean that you will have a profit of Rs. 1100 every day. Many people think that I will get Rs. 1000 from the market every day. It is not like that. You should look at the results. Look at it from a statistics point of view. Typically, what is the standard deviation of the results of the strategy? 70% of the time, the strategy will show you a penalty of minus 2000 to plus 2000. So it is possible that you will get minus 2000 3-4 times in a row. You will say that it has stopped working. It is not like that. Give the strategy enough time of instances to play out. Sure. Today, obviously, you have a trading life. Right? So what is your strategy right now? What algorithm are you running? Right now, I am running DT-1. So most of the positions are in Sensex. Okay. And I do a lot of overnight trading as well. So I do overnight STBT, BTST. I also hedge my open positions. That is very important. And there are ATM shots, OTM shots that are there with some fixed top losses. So if you want, I can just go to my... Typically, I don't see my penalty in the live market because there is no actionable, whatever I have told, this is what is going on. If you see right now... But these are not intraday strategies. Were these positions carried from the past? No, I have taken this position today. Okay. And they will continue till tomorrow. Tomorrow, they will square off. And then tomorrow also, I will do some intraday trading for the expiry for Sensex. Okay. So in this, for example, let's take any set that you have traded. By the way, you are using Quota. That's a very good thing. Yeah. Why are you using Quota? Okay. So, trading is a business, right? In business, you want a partner. First, who is reliable and also is cost efficient. Now, especially now with the STT news that has happened, these are, this will all add to our costs. Yeah. And margins are thin over here. Okay. So, we keep our costs limited. Quota, from the start, has been a broker who has charged low brokerage. In fact, recently, I think in November, they made their API trading free. Yeah. But I have been a Quota user for like 3-4 years. Yeah, 3-4 years now. Because you are using API. Technically, you don't have any brokerage. I don't have any brokerage. But the government is taking STT. So yeah, and that will kick in from April. So, let's see, it will be in April. They are taking something, the price has increased. Yeah, it has increased, absolutely. Okay, so let's see the trade. So, in fact, Vivek ji, if you ask me why did you short this, then I won't be able to tell you. Because at this time, as of now, around 25 algos are running. Oh. Each algo has taken a different position. Yeah. Someone has done ATM, someone has done OTM, someone has a different stop loss. Oh. So, you will tell me where did this lag come from, I won't know. I am so sorry. So, how does it work? You have developed it in the software of algos. There are many platforms that are there. So, there is a platform like Quantiply that I use extensively. There is Traitron. Okay. There are many other platforms. So, you have coded there. No, so, in fact, the good thing is these platforms, I use Quantiply a lot and you don't need to code. I mean, just you have backtested the heterogy. You will put the same logic. Literally, in 3-4 minutes, the heterogy will be made. Which you have backtested. And you have made it live. Just connect the broker, connect the API. It quantifies everything. Yes, it quantifies everything. Whatever you take, you will have a lot of tools. You have a lot of middleware. Absolutely. For a retail investor, this is not a big deal. If you want to do it, you can do it. In fact, I was doing a full-time job without ever looking at the charts and I became profitable because I was not looking at the charts. I will tell you that. And it's a hectic job, right? When you live in a corporate leadership role, it's a hectic thing. But I am talking to you now, the trades are going on, I am not looking. So, I think that's a boon that has happened with algorithms coming into the market. Very good. So, we have got a good learning that if you are a trader and want to do part-time, then you can learn algo trading. I mean, we are trying to teach this story in this video as well. There are many more videos like this that you can learn from. And this job of integration, that broker versus your system, it is easy these days. It is not the same thing as before. And strategy development has also become easy thanks to LLMs. You can also do strategy code. It has become easy. Yeah. Okay. Like someone made something in the trading view, some indicator. Now you have to put it in the broker's terminal. Absolutely. It is very smooth. Very smooth. Absolutely. And in fact, if you see, I have open orders as well. So, I have stop-loss orders here. So, my algo has put a stop-loss order here. Aren't you afraid if the robot is working wrongly? In the beginning, there was some amount of anxiety. But it has changed my life for the past so many years. I have been doing it now. I trust the system and I know that when an error happens, I will get a notification. So, which system gives you the notification? Because the error is on this terminal. Does the terminal notify you? So, for example, the middleware software will get a message from the broker that this error has occurred. The sell leg was not able to be cut off. Then that thing can be configured to my mobile number and to my Telegram account. I get an error over there. Okay. So, in some platforms, you get a call that the strategy has gone into an error. Please check. Okay. And in some, you get a notification and I have put an alarm sound over there. I just see over there that an error has occurred. Let's see what has happened. Then you talk to the support over there that an error has occurred. What has happened? Then they will see what the problem is. And you can square off the positions. Very good. Which tool is this? So, again, Quantiply, Traderon, all these. Absolutely. So, since they are selling algorithms or the way to deploy algorithms, they need to do that because the consumer will think that an error has occurred. Okay. So, as a retail trader, now it's really very... So, you subscribe to Quantiply. You have to pay for that. Absolutely. It's a cost. It's a business cost. It's a business cost. Any subscription, you have to accept. Absolutely. In fact, learning also, it's a business cost. You are just empowering yourself, right? Exactly. I remember, I read a quote outside in your office that you are your biggest asset. So, I mean, invest in yourself. Of course. Let's look at the P&L and the financials of the strategy. Okay. We had equity mutual fund around four and a half lakhs. Okay. Around 3.2 lakhs in debt. We got this for the margin. We have kept a buffer of 60,000 because the capital drawdown was of 24,000. So, I have taken it approximately 2.5 times for mark to market and whatever drawdown you face. So, typically, you have gone with around 8.3 lakhs of total capital. This is the typical ROI that you generate from an equity mutual fund of around 12% from equity mutual funds in a long-term level. And debt mutual funds are of 6%. Total annual ROI is this. This is the number of our 15,700 into 12. It won't be this much. 15,700 into... You said it won't be this much return. It will be less for some reason. Yes. So, what you can do is, typically, what I do is when I look at the number, I get 70-80%. Okay. But the good thing is that we have considered slippage of 0.8%. Typically, I get 0.5% in the past whatever years I have done. But we have considered a higher slippage. Okay. So, this is it. Costs include your brokerage cost. I have considered a broker which gives you Rs. 5 per order. And there are many brokers right now. Kotak doesn't charge. So, you can definitely look at that as well. Plus, algo execution cost which is the platform that you will look for deployment. Plus STT GST etc. This is the net ROI that you see after the cost. So, this is around 2.19 lakhs. So, pre-tax is around 26%. 12% on this, 6% on this. And this is the total number. So, this upon this is around 26%. Understood. You can take the tax which is 12.5-12.5%. You will get long-term gain tax on this. And I have assumed that the person who is trading will have to pay 22% personal income tax. It can be 30%, it can be 0% as well depending on who is trading. If you are doing it in your HOF account or someone who is not working, if you are doing it in their account, then the tax is 0% up to 12 lakhs. So, this tax can vary in that way. But the main thing what you see is, In pre-tax you get 26, post-tax you get around 21%. And you can consider that 70-80% will come. But that also is a good return post-tax level pay from the backtest. So what I typically do is, I'll typically backtest different strategies. Look at the number, look at the cost also involved over there. And then look see, does it meet my objective in terms of my risk and my return objectives. If it does, I implement that. What's your CAGR approximately if I ask you? So, last year from algorithmic, it was around 40%. The last financial year I'm talking about. This financial year, it was around 32% before the gap-up. When the gap-up happened, market blessed me. It's now at around 42%. Gap-up was good for you? Yeah. But you do short. So, I also buy hedges. And many a times I buy hedges despite no shorts in my portfolio. Okay. So, I had hedges, I had OTM. I had options. I don't know the strike because I don't see the market. But I remember that it was at around 5 rupees I had bought. Around what quantity? 5 rupees, around 3000 quantity. And it got squared off the next day morning at around 315. But that will be against the short, no? No. You just went long? Yes. So, I'll tell you. What happens in lot of platforms is that platforms can't see how many shorts you have open. Okay. So, if I'm selling straddle since morning, suppose call is hitting, my call is not in the system, it's in the put system. But when I take overnight, I take hedges. Okay. I should only take put hedges. My put is short. Okay. But Algo platforms that I use don't know how many calls I have open and how many puts I have open. What I do is that now I can't give 325 every day that how many are open and how many are not open. So, I say that the maximum number of shorting of my strategy, I buy that much calls and puts in Nifty 500 points away. Okay. I buy it. It's a cost. Okay. And this is a very important concept. I learned it when I was reading a book by Naseem Talib. And he mentioned that like in high risk scenarios, like for example, if you are at the airport, right? You are taking a flight. So, your checking happens 3-4 times, right? When you are entering, your security guard is checking you. Then your baggage is going. Okay. Sometimes, checking happens before entering the flight. You are opening your bag properly. Exams are going. Versus if you are traveling in a train, then hardly any checking happens. But the risk involved is very high. Now, the airport authorities, for them, this is a redundant cost. Assuming that everyone is not a terrorist and everyone is good. But they are spending that cost because the risk is very high. So, when the risk is very high, you may have to have redundancy or redundant cost in your system. So that in case if there is some bad thing that happens in the market, you are there. And hence, I always cover or take a hedge against my position. The only issue is that my algo does not know how many calls and puts are short. I take the maximum quantity because I want a peaceful sleep at night. So, my calls were not short. And algo bought that call and buys it every day. And I bear that cost. I have losses. I have losses every day. But one fine day, it comes back and gives you a number. And yeah, on that day, I hit a number of 1 million. So, that was the profit on that day. But yeah, it's a part of the process. So, there can be a profit loss. Correct. Interesting. That's a good return you have generated. 42% is not a low. This is pre-tax, obviously. This is pre-tax. Absolutely. This is pre-tax. So, it's not a low return. Yeah. Yeah. So, how many strategies are you running parallelly? You said? Around 25 to 30. 25 strategies. Yeah. You have to do 25 strategies. You will get 75 lakhs. If you hedge a little, the margin will be a little less. Interesting. And obviously, I keep a lot of buffer also. So, what do you think? What should be the minimum capital required for anyone to become a full-time trader? Full-time trader. Leaving job, everything. How much capital should not be done without? I think, before the capital, I think it's about whether you have the process or not. Because, like in corporate, what we do is, we do a pilot, right? Let's see if the pilot is successful or not. If it works, then we put in the capital to scale it up. Sure. So, first you do a pilot and come with at least 5 lakhs. So that you can do 2 straddle, 2 strangle. Let's see how it is happening. And then you scale up slowly. Okay, now how much amount do you need so that you feel secure? That is depending on your expenses. Of course. So, if I think that my monthly expenses are 2 lakhs for the family. Yes. Okay. So, and if my capital is say 1 CR. Yes. And if I will be able to take out 20-25% post-tax. Yes. My expenses are being covered. Yes. It would be a good thing if your spouse is also earning. In my case, my wife is also an MBA. She also earns. Okay. So, then the expenses are getting managed. I mean, there is no... So, then you need to... You can have your time freedom, right? So, that is how it is. So, depending on your expense. It is important to have alternate source of income also to run the family. Otherwise, if you are only running a family based on trading income, it can become risky. This section I wanted to cover on how I use AI in my trading. AI is a very interesting topic, right? For the past 2 years, the kind of disruption it has caused in the market across industries has been crazy. And I am trying to understand what is the potential for AI in trading in my day-to-day trading which I can apply. So, I have put down 3 situations where I actually use AI in my trading. Okay. So, the first situation actually is AI as my trading buddy and coach. And this is a real example. And I think most of the traders will agree with me that trading is a very lonely profession. Okay. Most of the times, your family members or relatives or friends tell you not to do it. This is a gamble or whatever. Nowadays, someone called Satta also in a big forum, right? So, it's a lonely profession. You don't talk about it. Okay. What happens is that when there is a profit, we will talk to our friends. Look, there is a profit. But when there is a loss and there is a loss for a long time, then you get in a cocoon, right? You don't talk to people. What will you talk to your family? He is making a loss. Okay. So, the toughest part is not strategy but it is the mind. So, what I realized is and when initially I used to have bad phases as well, I used to talk to AI a lot. So, while I also talk to my wife and she understands me, so as to get a perspective from a trader's point of view. And see right now, AI over here is the smartest thing on the planet. The smartest, maybe a doctor, smartest engineer, also smartest trader because it has the knowledge of all the traders. You just ask him, think like a profitable trader and it will come back to you with all the solutions. And I used to talk to it, that there is a loss, there is a drawdown and it will tell me answers based on my personality and that I loved it. So, for example, when I do algo trading, as I was saying earlier, today I am not looking at P&L. Before, I used to see my P&L or M2 every 30 minutes. What is happening? What is happening? Okay, no one is actionable. But seeing that P&L, I am going up and down. Okay, if P&L is showing, plus 1 lakh. And I checked in 2 hours, it came to minus 50. It is possible. Then now my minus is stuck at 1 lakh and my day is going bad. And many a times, you would know the answer, but since you are in the game, you can't see the big picture. I just spoke to ChatGPT, act like a trading coach and help me understand this. In fact, I made a custom GPT of a trading buddy. And it told me, it's like, Vaibhav, you know that you are an algorithmic statistics trader. This thing that you are seeing right now is irrelevant. Day-to-day P&L or day-to-day MTMs are irrelevant because statistically that number is not valid. Look at it over a long-term period. And what it told me is that your job as a systematic trader is about execution, not the output. It is about the input. And when someone tells you that, it really opens your mind. Initially, what used to happen is when you used to make losses or bad phases, you will talk to traders and typically in your community, most of them would be loss-making traders. So they don't know what to do. They are also giving wrong advice. Now you have an expert who can guide you. So from there, From a guiding point of view, AI works like a charm. Especially because it now understands me given the discussion that have happened with AI. So as a trading buddy and coach, it is one application that I do. And I'll request a lot of people or trading community people who are going through say emotional challenges in trading, talk to AI, it will guide you. Any kind of emotional challenges. Absolutely. In fact, the number one use case now of AI is emotional support. So yeah, the second application that is there is from an accelerated learning point of view. How to speed up learning. And I read a lot of books. And I also follow a lot of international algo traders, systematic traders. Like Perry Kaufman, Rob Carver, Kevin Davy. I read their books. What happens is, the concepts they tell because they are mature in their trading journey, the concepts are very dense. It looks a little complicated. And it gets a little technical. Okay, I often don't understand what it is. The simplest solution is, take a screenshot of those concepts, upload it on AI, put it on ChatGPT, put it on Gemini, put it on Grok. Tell them to explain to me. Explain like you are Perry Kaufman and you are teaching me and I am your student, I am your mentee, you are my mentor. Explain it to me. Many a times I get PDFs, I upload PDFs. The kind of output you get, it's like having a world-class mentor of that personality, teaching you and also telling you how to apply that in your trading journey. So, in fact, I have kept a lot of personas in my GPT that Perry Kaufman has a persona, Kevin Davy has a persona. So that helps me a lot. And last application is AI for strategy analysis. A lot of times you will have strategy results that will come to you. For example, suppose we are analyzing a strategy, we saw that its drawdown is approximately 10%. Then what did you do? You changed the time a little, changed the surplus a little, changed it a little, now the drawdown is 5%. But actually that may not be a statistically relevant drawdown because maybe it is curve-fitted. Or maybe it is luck. So how do we know that the drawdown is statistically valid or not? So for that, most strategists do Monte Carlo analysis where you do 1000 simulations of the same P&L by going up and down. If the path of your profit-loss, if it follows a different path, then how does your P&L look? It shows that. So I will upload my strategy results onto ChatGPT. I will tell them that this drawdown has come, but you find the median max drawdown of this. On an average, how much can it be on a median? Also tell me how much it can be 90% times. So that I know that this is a big risk that I am taking, keep that much buffer in my capital. So now doing a Monte Carlo may need some high-end software, I don't know what, but ChatGPT does it for me. So again, that's a blessing. And similarly, as I mentioned, look at standard deviation of your P&L. Either do it yourself in Excel or put it on GPT. It will tell you that typically 70% of your time, your P&L should be between this and this. So this is normal, don't worry. So what AI helps me is, it helps me respect risk before the market teaches me the hard way. So I think these are three applications that I really look forward to from an AI point of view. Very good. It was fun. Yeah. I learned a lot today. I enjoy it so much when I learn something today. Thank you so much. It was so much fun. And using AI, I do a lot of things which you just mentioned, but there are a lot of things which can be still done. But we are still at a nascent stage of AI and the world is going to be so different. I like the fact that you're using it as your coach and using the world-class traders as your coach. It can happen now if people want to. So the people who are teaching, their shop is going to shut down because AI will do everything that a common man can't do. Except the shoulder. The shoulder can still give a mentor. That AI is still a little far away. Mr. Elon Musk is trying his best. He wants to give 2 billion human tabloids to everyone so that we can take the shoulder from him. Good. It was fun talking to you. Thank you so much. Thank you so much. You have a very good clarity. You are a good human. And you are really a good family man. Keep working like this and keep teaching people. Your handle, Twitter or wherever you are, we'll share below the video so that people who want to connect with you want to connect. Just again, a last disclaimer before we leave. As on date, what we know about him, he is doing his own trading. He is happy doing whatever he is doing. But obviously, what will he do in the future? Will he do a course or not? Will he do an advisory or not? I have nothing to do with it. I really liked what he is doing. My team liked what he is doing. And that's why we are sharing the knowledge. Whatever you want to do with him, you know and he knows. Thank you so much. Everyone now wants to save their asses. Absolutely. Thank you. It was fun learning from you. See you soon. Thank you so much. Thank you.